We have covered FIFO Method of inventory valuation in great detail. In examination, numerous types of questions are asked. That is why, it is the right time to practice FIFO Problems and check with our answers.
Problem
Zubi Plc is a furniture manufacturing company and is in business from 10 years. It has large multinational and national banks as a customer. The following are the purchases and issues during the month of March:
| March 01 | Opening Inventory | 800 units | @ $ 7 |
| March 05 | Purchases | 1,000 units | @ $ 6.55 |
| March 09 | Purchases | 400 units | @ $ 6.2 |
| March 25 | Purchases | 1,400 units | @ $ 6.05 |
| March 12 | Sales | 1,200 units | |
| March 27 | Sales | 1,000 units |
Required:
Find out the value of Ending Inventory on March 31.
Find out the value of cost of goods sold under FIFO method using the perpetual inventory method.
Solution
Zubi Plc
Inventory Card
Perpetual Inventory System
FIFO (First in First out Method)
| Date | Purchases | Sales | Balance | ||||||
| March 01 | 800 | 7 | 5,600 | ||||||
| March 05 | 1,000 | 6.55 | 6,550 | 8001,000 | 76.55 | 5,6006,550 | |||
| March 09 | 400 | 6.2 | 2,480 | 8001,000400 | 76.556.2 | 5,6006,5502,480 | |||
| March 12 | 800400 | 76.55 | 5,6002,620 | 600400 | 6.556.2 | 3,9302,480 | |||
| March 25 | 1,400 | 6.05 | 8,470 | 6004001,400 | 6.556.26.05 | 3,9302,4808,470 | |||
| March 27 | 600400 | 6.556.2 | 3,9302,480 | 1,400 | 6.05 | 8,470 | |||
| Total | 2,800 | 35,000 | 2,200 | 29,260 | 1,400 | 16,940 |
Value of ending inventory of 1,400 units = $ 16,940
Cost of goods sold = $ 29,260